Split Dollar Life Insurance

Many businesses may appreciate the versatility of Life Insurance products in allowing them to use one policy to meet a dual need!  It is not unusual to encounter a business that requires financial protection that life insurance provides against death, either theirs or someone else’s within the company (i.e. Key Man Insurance) while another person needs a tax-sheltered investment vehicle.

“Split Dollar Life Insurance” can provide for the needs of both parties through ONE Life Insurance policy.  In these types of arrangements, on party typically owns and pays for a level death benefit portion of the policy and the other party owns and funds the remaining interests in the policy.

One example of Split Dollar Life Insurance being used effectively is when an employer needs Key Person Insurance on an executive and the executive is in need of a tax-sheltered investment vehicle. The employer and the executive could enter into a Split Dollar arrangement where the employer pays for and owns a level death benefit on the life of the executive and the executive pays for and owns the cash surrender value component of the policy. The beneficiary of the level death benefit is the employer, while the beneficiary of the cash value is designated by the executive who may choose his/her spouse, children etc.

Please be advised that tax implications on Split Dollar or any other type business insurance program must always be taken into consideration during the design of the program to ensure its long term effectiveness. For additional information on establishing this program for you business or company, please contact Health Risk Services Inc.

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies